Will the Olympics Spur an Ad Recovery?

Feb. 8 -- Pulling the media world out of its advertising slump could be an Olympian feat — literally.

With advertising in the doldrums — McCann-Erickson WorldGroup forecaster Bob Coen said the ad market in 2001 saw the biggest spending decline since World War II — some are hopeful that the Winter Olympics, a 17-day event that gets under way this weekend, could spur companies to delve into buying commercial time again.

Other industry watchers say an advertising recovery is likely to be slow in coming and may not get started until later on this year, when political ads for many senatorial and gubernatorial races are expected to flood the airways.

To be sure, the Olympics will give its broadcaster NBC a boost in advertising revenue. The peacock network's commercial time during the Games was about 98 percent sold as of last week, bringing the company close to its goal of $720 million in ad sales for the games. But whether or not that translates into a full-blown advertising recovery is another matter.

"The Olympics and sports events do give a modest boost to all TV advertising, but it tends to shift the market share to the network who is carrying the sporting event," says Lee Westerfield, broadcasting analyst for UBS Warburg in New York.

Westerfield expects the Olympics and the Super Bowl, the year's other prime advertising venue, to boost the ad revenue of NBC and Super Bowl broadcaster Fox by between 2 percent and 8 percent. Competitors CBS and ABC, which is owned by ABCNEWS.com's parent company Disney, will see their ad revenues drop by between two and 20 percent, he estimates.

Location, Location, Location

Making the Games especially attractive to U.S. advertisers is their Salt Lake City location. This year's competition marks the first Winter Olympics in the United States since the Lake Placid Games in 1980.

Location is important for advertisers because of the difference in time zones. During the Summer Olympics in Sydney, Australia — when many U.S. fans found out the results on the Internet before NBC replayed the events during prime-time hours — some advertisers were given extra commercial time because the ratings were not as good as the network had promised. A guarantee of a certain rating is usually part of a company's ad purchase for an event like the Olympics, say industry insiders.